The equity commitment, which will be leveraged up to 65%, provides a buying power of up to $220 million, Tom Bacon, Lionstone Group principal, tells GlobeSt.com. He says OPERF could commit another $50 million to take the leveraged buying power as high as $360 million.

The acquisition program will be channeled through a discretionary fund, Cash Flow Office One, designed to be perpetual with all distributions and sale proceeds available for reinvestment. Bacon says Lionstone has applied its unique, research heavy approach to identify 500 potential acquisitions in 65 markets. The research shows each building has successfully weathered at least two real estate cycles.

Bacon isn't being specific about which markets, but did say 22 US office submarkets have been targeted as priorities. Though he's not saying too much about the weight given to Houston, he did say some of the targeted buys are in Lionstone's homeport.

"This is a very targeted investment vehicle," Glenn Lowenstein, Lionstone principal, said in a press release. "Our research has identified a large niche of $10-million to $50-million office buildings in 'permanent' locations. We know exactly what we want in each market."

Dubrowski says Lionstone is projecting long-term returns in excess of 12% net to the investor with more than 75% of the return coming from current cash flow.

The $30-billion OPERF is looking to invest more than $2 billion into real estate assets. Lionstone is one of five firms lined up for the capital deployment.

Bacon says Lionstone went to six top-tier pension funds looking for a good partner. OPERF liked the depth of research behind Lionstone's investment strategy and the full array of skills of its principals--Bacon, Lowenstein and Dan Dubrowski, all former executives with Houston-based Hines Interests.

Steve Gruber, OPERF's senior real estate investment officer, said the pension fund "seeks to hire the most talented investors in the country to work on its behalf. Lionstone's focused strategy, its research capabilities and the track record of its principals should lessen the total return volatility associated with the boom/bust cycle of office building investments.